Under the FCA’s Senior Managers and Certification Regime, all UK financial services firms must ensure that senior manager function holders (SMFs) and certified staff are fit and proper. This includes carrying out ongoing assessment for SMFs, annual certification for certified staff and providing appropriate Conduct Rules training and refreshers.
At this time of year, SMFs – at a minimum – and often all certified persons are provided with annual training. However, many firms are missing the real opportunity this moment presents.
Leveraging the full potential of SMF training
The training is still often treated as an annual compliance exercise, a familiar programme rolled out to satisfy regulatory expectations rather than a moment designed to shift behaviour. That framing understates its potential. There are few other points in the year that require every senior manager to pause and examine how they lead, make decisions and set the tone.
Used well, this is a rare and powerful opportunity to strengthen judgement, reinforce psychological safety and mitigate people risk – not simply to pass a fit and proper assessment.
There is a mountain of evidence demonstrating the commercial impact of doing this. Gallup’s research, for example, links strong organisational culture to materially higher levels of employee engagement, and to net profit growth of up to 85% over five years.
Gallup has also found that 70% of team engagement is attributable to the manager, underlining the outsized influence leaders have on performance, culture and risk across the organisation. At senior manager level, you have leaders of leaders, so that focus on engagement ripples across not only the next level but the whole organisation.
Is it really that important?
Non-financial misconduct remains a material issue: The FCA revealed a 67% increase in reports of non-financial misconduct between 2021 and 2023. That raises an uncomfortable question about whether existing approaches to training are delivering the behavioural change firms actually need and that regulators are seeking to drive across the industry.
Performance, culture and risk are not separate considerations in financial services; they are increasingly inseparable. The FCA’s Individual and Senior Manager Conduct Rules are, at their core, behavioural in nature. They require senior individuals to act with integrity; exercise due skill, care and diligence; maintain effective oversight; identify and escalate issues promptly; and treat customers fairly.
In addition, provisions of the Employment Rights Act 2025 will impose a duty on employers to take all reasonable steps to prevent sexual harassment, and to assume liability for harassment by third parties, further increasing the responsibilities placed on senior leadership.
With greater regulatory focus on psychological safety, non-financial misconduct and decision-making under pressure, firms need SMFs and Certified Persons who can apply these rules confidently in practice. Time and budget constraints drive the need to maximise this chance to make meaningful change.
How can firms turn a mandatory regulatory requirement into a lever for culture, conduct and better decision-making?
That depends on how the training is delivered. It needs to bring the issue to life and create genuine engagement with the behaviours and judgements that regulators are focused on.
This starts with connecting the FCA’s Conduct Rules with the everyday moments that actually shape culture, conduct and, ultimately, outcomes.
First, focus on the moments that matter most.
That means spending less time on abstract leadership theory and more on the situations where conduct risk most often surfaces, for example:
- Early conversations about behaviour, performance or risk
- Responding when concerns are raised
- Decision-making in ambiguous or pressured situations
- Delegating and oversight of responsibility
- Shaping an environment where people feel able to speak up and challenge safely
Anchoring learning in these moments helps managers build a clearer sense of exactly when and how they are expected to hold themselves to the highest standards.
Second, make space for reflection.
Practical, reflective learning plays an important role too. Leaders benefit from working through nuanced scenarios, considering how their own behaviour either mitigates risk or amplifies it.
The most effective training for Senior Management Functions is training that mirrors what the Senior Manager Conduct Rules require in practice. That is, taking reasonable steps to identify vulnerabilities within the business and to ensure that they are addressed and remedied.
Third, make it real for your organisation.
One-size-fits-all approaches rarely reflect the realities of a firm’s risk profile, culture or commercial pressures.
Beyond the FCA’s baseline expectations, organisations may also want to be explicit about the standards and values they expect leaders to embody. This includes the quality of performance conversations they value, the behaviours they want Senior Managers to model, and the tone they are seeking to establish more broadly.
Handled well, this kind of approach can leave Senior Managers and Certified Persons with practical tools and clarity, rather than compliance fatigue.
